The main project objective was to support the implementation of Government of Nepal's forest sector strategy directed towards development of sustainable management of the country's forest resources through community participation. The project was confined to one geographical region in the country (the mid Hills) and covered 38 of the 54 districts.

b. Components

The project had four components: a) an institutional support component to strengthen and build the capacity of the Forest Department (FD) to implement community forestry; b) a forest resource management and restoration component; c) a training and extension component to communicate His Majesty's Government's strategy to FD staff and forest communities; d) a research component to help generate improved silvicultural techniques for conservation, increase the productivity of forest resources and provide socio economic information on resource utilization to enable better planning. In addition the project provided assistance for construction of houses, office buildings, nurseries and traing centers.

c. Comments on Project Cost, Financing and Dates

The credit (US $ 30.5 million) was approved in August 1989 and became effective in May 1990. Credit effectiveness was postponed twice as a number of covenants related to field administration needed amendment. DANIDA financed the Training and Extension Component (US $ 6.03 million) and UNDP financed technical assistance to the amount of US $ 640,000. Total project costs equaled US $ 18.7 million, compared with appraisal estimates of US $ 45.4 million. This was largely for two reasons: under spending under the forest resource management component which at appraisal accounted for 65 percent of the total project cost; depreciation of the Nepali rupee. MTR was undertaken in December 1993. At the recommendation of the MTR, US $ 13.34 million was canceled in 1995. A further US $ 4.87 million was canceled in 1998. Finally an undisbursed balance of SDR 0.43 million was canceled in November 1999. Total disbursements equivalent to 28 percent of the credit amount were made. The project was extended twice from its initial closing date of June 30, 1997 and closed in June 1999.

3. Achievement of Relevant Objectives:

(i) Project provided support for the government strategy for development and preservation of forest resources in the mid Hill region.

(ii) It successfully introduced the policy, legal and procedural framework necessary to establish a user-group-based approach to forest management. (iii) It contributed towards bringing a change in role and attitude of the FD from a policing body to one promoting and facilitating local community efforts at forest management. (iv) It helped create awareness and interest at the community level for preservation and managment of forest resources.

4. Significant Outcomes/Impacts:

It is difficult to measure project outcome/impact since the project failed to develop monitoring and impact indicators. However the project helped establish the relevant institutional, policy and procedural framework for promotion of community forestry. A large number of Forest User Groups were established and empowered. The recalculated ERR at 18 percent takes into account the environmental benefits from forests and yields from non traditional forest products.

(i) Research component of the project was never implemented. As a result specific and priority problems emanating from field implementation could not be addressed. (ii) Overemphasis on plantations as a strategy for forest restoration in the early years reduced the effectiveness of the forest restoration and management component. This was deemphasized after the MTR. (iii) Poor monitoring of project outcomes and impacts. (iv) Inadequate donor coordination which was largely responsible for non implementation of the research component and inadequate arrangements for M&E. (v) Weak linkage between field staff and the center and the government policy of frequent staff transfer hindered project implementation.

6. Ratings:

ICR

OED Review

Reason for Disagreement/Comments

Outcome:

Satisfactory

Marginally Satisfactory

(i) Cancellation of the research component; (ii) inadequate M&E which could not be addressed despite the recommendations at MTR; (iii) mixed achievements under the forest resource management component.

Institutional Dev.:

Substantial

Substantial

Sustainability:

Likely

Likely

Bank Performance:

Satisfactory

Satisfactory

Given the poor performance of the Bank in the design of the plantation/nurseries activities and the research component, the Evaluation Summary would ideally reduce the Bank Performance rating to marginally satisfactory. However, this option is not available to OED.

Borrower Perf.:

Satisfactory

Satisfactory

Though overall borrower performance may be judged to be satisfactory, delays in providing staff and buildings, together with frequent staff transfers, negatively affected project implementation.

Quality of ICR:

Satisfactory

7. Lessons of Broad Applicablity:

The lessons identifed by the ICR are interesting and have important implications for the future management of Nepal's forests. Four lessons from the ICR are repeated here. (i) Reorientation of government institutions --the project has demonstrated that given a favorable policy and legal framework, a government department can evolve from one concerned primarily with policing to one working with communities in forest management; (ii) Restoration of forest ecosystems--Protection and management of natural regeneration has proven to be a more successful mechanism than plantation establishment to restore forest ecosystems; (iii) Sustainability and ownership--community empowerment cannot be accelerated at a pace beyond the capacity of the facilitating institution to manage expansion and the rate of learning and behavioral change required by forest users. (iv) Monitoring and evaluation--the weakness in M&E meant that ineffective strategies were supported for longer than they should have been with associated financial costs.The Evaluation Summary adds the following: (i) Establishment of a sound policy and legal foundation and clear benefit sharing arrangements are essential for the sustainability of a forest managment program based on community participation.(ii) Multiple donor involvement in the forest sector in Nepal was a reality before the project. In such situations caution needs to be exercised during project preparation to ensure that donor overload and/or coordination does not become a handicap in project implementation. (iii) Given the potential of forest development to impact the lives of the rural poor it is important to make forest sector development an essential part of the poverty alleviation strategy of the Bank in the country.

8. Audit Recommended? Yes

Why?(i) To provide lessons of broad applicability for programs based on community participation for the South Asia Region as a whole. (ii) To verify sustainability of the community participation effort given the concern within the FD that as forests improve and incomes increase the effort may be undermined by local elites.

9. Comments on Quality of ICR:

A joint World bank-FAO-DANIDA team carried out the completion mission for the project. The ICR is satisfactory and complete and includes the Borrower's comments and comments from DANIDA. The Aide Memoire is informative and gives a clear account of the project.